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Supreme Court Decision Reduces Plaintiff's Ability to 'Double-Dip' in Third-Party or UM/UIM Automobile Cases

In Tannenbaum v. Nationwide Ins. Co., No. 100 MAP 2007 (Pa. April 28, 2010), a 3-2 decision authored by Justice Saylor, the Supreme Court of Pennsylvania has held that Section 1722 of the Motor Vehicle Financial Responsibility Law applies to personal disability policies and prohibits a claimant from recovering as damages any items of income loss for which he was already reimbursed by a disability insurer, regardless of whether the claimant paid for the disability insurance himself or received it as an employee benefit.

Although Tannenbaum involved an underinsured motorist claim, Section 1722 applies to "any action for damages against a tortfeasor", as well as UM/UIM claims, so this decision has relevance to both third party liability and UM/UIM cases.

Tannenbaum is a very important decision and will affect the handling of many auto claims. Previously, several lower courts had taken the position that any disability plan purchased by a claimant, or provided by the claimant's employer as a benefit in lieu of wages, were benefits received from a "collateral source" which could not be set off from the claim against the tortfeasor or the UM/UIM carrier, despite the fact that recovery from both the disability plan and the tortfeasor or UM/UIM carrier would result in a double recovery for the plaintiff. In Tannenbaum the Supreme Court has made it clear that such a double recovery is prohibited by the MVFRL and, therefore, tortfeasors (and their carriers) and UM/UIM insurers are entitled to set off amounts recovered from disability plans against any claim arising from the same loss, at least in cases where the disability insurer does not have the right of subrogation or is not pursuing subrogation.

Tannenbaum may very well apply to other forms of recovery in addition to personal disability plans. The decision will surely be further analyzed and commented upon. It is, however, quite clear that Tannenbaum is an important development and must be considered in the evaluation of any third-party or UM/UIM claim in which the claimant is seeking recovery of losses for which he has already been paid from another source.

For more information regarding this decision, please contact Craig Murphey, any member of MacDonald Illig's Insurance Practice Group, or the MacDonald Illig attorney with whom you've worked.